The essential elements necessary to form a legally binding contract are usually described as:
An offer is defined as the manifestation of the "willingness to enter into a bargain so made as to justify another person in understanding that his (or her) assent to the bargain is invited and will conclude it."
- An Acceptance (in Strict Compliance with the Terms of Said Offer)
Acceptance of an offer can occur in several ways. Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited, or required, by the offer. An acceptance must not change the terms of an offer. If it does, that offer is to be rejected. A material change in a proposed contract constitutes a counteroffer, which must be accepted by the other party in creating a binding contract.
- Legal Purpose or Objective
The objective of the contract must be for a legal purpose. For example, a contract for illegal distribution of drugs is not a binding contract because the purpose for which it exists is not legal.
- Mutuality of Obligation - Also Known as the "Meeting of the Minds"
Mutuality of obligation, also known as the "meeting of the minds," refers to the parties' mutual understanding and assent to the expression of their agreement. The parties must agree to the same thing, in the same sense, at the same time. The determination of a "meeting of their minds," and thus offer and acceptance, is based on the objective standard of what the parties said and did and not their subjective state of mind. Unexpressed, subjective intent is legally irrelevant. In determining whether mutual assent is present, the court looks to the communications between the parties and to the facts and circumstances surrounding those communications. The offer must be clear and definite just as there must be a clear and definite acceptance of all terms contained in the offer. When a "meeting of the minds" is contested, the determination of the existence of a contract is a question of fact. If the fact-finder determines that one party reasonably drew the inference of a promise from the other party's conduct, that promise will be given effect in law.
To be enforceable, the parties must have agreed on the essential terms of the contract. However, parties may agree upon some contractual terms, understanding them to be an agreement, and leave other contract terms to be made later. It is only when an essential term is left open for future negotiation that there is nothing more than an unenforceable agreement to agree. Such an agreement would, therefore, be void as a contract.
Any contract, or mutual understanding, between parties that differs materially from the original offer is usually open to legal challenge. Should any component of a negotiation tend toward a result where a contract, or agreement, differs materially from the offer, that component of the negotiation should cease. If the component in question is critical to the provision of a service or goods, the issuance of another offer that incorporates that component should be considered.
- Certainty of Subject Matter
In general, a contract is legally binding only if its terms are sufficiently defined to enable a court to understand the parties' obligations. The rules regarding indefiniteness of material terms of a contract are based on the concept that a party cannot accept an offer to form a contract unless the terms of that contract are reasonably certain. Thus, the material terms of a contract must be agreed upon before a court can enforce a contract. Each individual contract should be considered separately to determine its material terms. Generally, an agreement simply to enter negotiations for a contract later also does not create an enforceable contract. Parties may agree on some of the terms of a contract and understand them to be an agreement, and yet leave other portions of the agreement to be made later.
Sometimes, terms are omitted from contracts and assuming the omitted term is not an essential term, the courts have implied terms to preserve the enforceability of the contract should a legal challenge arise. A court may uphold an agreement by supplying missing terms. Historically, Texas courts prefer to validate transactions rather than void them, but courts may not create a contract where none exists and they generally may not insert, or eliminate, essential terms. Now whether a court will imply, or supply, missing contract terms will depend on the specific facts of the transaction. An example of terms that have been implied, or supplied, include the time and place of performance.
Consideration is an essential element of any valid contract. Consideration consists of either a benefit to the promisor, or a detriment to the promisee. It is a present exchange bargained for in return for a promise. It may consist of some right, interest, profit, or benefit that accrues to one party; or alternatively, of some forbearance, loss, or responsibility that is undertaken or incurred by the other party. Contrary to popular opinion, it is not necessary for an enforceable contract to be supported strictly by monetary consideration.
Parties to a contract must be competent and legally authorized to enter into an enforceable, valid contract.
If any one of the above elements is not included in a contract and/or the terms or conditions of said contract are not being adhered to, you will need the experience of an attorney previously involved in such cases. Our firm has served the Dallas area for over 40 years. We have the resources to answer all your questions concerning a breach of contract and the qualifications to present a strong case for you. Please fill out our form online or call 972-980-8000 today and schedule your free consultation.